PICA: City budget approved, with qualifiers

The Pennsylvania Intergovernmental Cooperation Authority, the state agency charged with overseeing Philadelphia's finances, has given tentative approval to the city budget. You can read the entire report from the PICA website by clicking here. The vote was unanimous, but came with several caveats.

First, if the city fails to get approval from Harrisburg for two key components-- raising the sales tax from 7 percent to 8 percent and changes in pension contributions-- they will be required to submit a new spending plan within 15 days. That plan is likely to contain about $700 million in cuts over five years, since that is the amount of money raised by the proposals.

Another big unknown is labor contracts. Right now, the city is counting on saving $125 million over five years as a result of union negotiations. To make that work, the new agreements will have to include no wage increases and reductions in benefits. If these aren't the terms of the new contracts, the city will have to make up the difference in other parts of the budget.

Here is something that jumped out at me: PICA is requiring the city to cut an additional $25 million per year. That's exactly the same amount that the city would save from successful labor negotiations. Is PICA assuming that contract talks might not go Nutter's way? If so, requiring another $25 million in cuts would provide the city with some breathing room to keep benefit levels the same and maybe even bump salaries slightly.

What do you think? Should PICA have approved or rejected the plan?